Abstract:With the prospect of new layers of complexity being added to air pollution
controls, and with electricity restructuring putting a premium on economic efficiency,
interest is being expressed in finding mechanisms to achieve health and
environmental goals in simpler, more cost-effective ways. The electric utility
industry is a major source of air pollution, particularly sulfur dioxide (SO2), nitrogen
oxides (NOx), and mercury (Hg), as well as suspected greenhouse gases, particularly
carbon dioxide (CO2). At issue is whether a new approach to environmental
protection could achieve the nation’s air quality goals more cost-effectively than the
current system.

One approach being proposed is a “multi-pollutant” strategy — a framework
based on a consistent set of emissions caps, implemented through emissions trading.
Just how the proposed approach would fit with the current (and proposed) diverse
regulatory regimes remains to be worked out; they might be replaced to the greatest
extent feasible, or they might be overlaid by the framework of emissions caps.

In February 2002, the Bush Administration announced two air quality initiatives.
The first, “Clear Skies,” would amend the Clean Air Act to place emission caps on
electric utility emissions of SO2, NOx, and Hg. Implemented through a tradeable
allowance program, the emissions caps would generally be imposed in two phases:
2008 and 2018. The second initiative begins a voluntary greenhouse gas reduction
program. This plan, rather than capping CO2 emissions, focuses on improving the
carbon efficiency of the economy, reducing current emissions of 183 metric tons per
million dollars of GDP to 151 metric tons per million dollars of GDP in 2012.

In the 109th Congress, seven bills have been introduced that would impose
multi-pollutant controls on utilities. Two of the bills, H.R. 227 and S. 131, are
modified versions of the Administration’s three-pollutant proposal. The other five
bills, S. 150, S. 730, S. 2724, H.R. 1451, and H.R. 1873, are four-pollutant proposals
that include carbon dioxide. S. 150 is similar to a bill reported by the Senate
Environment and Public Works Committee in the 107th Congress. Likewise, H.R.
1451 is similar to H.R. 1256, introduced in the 107th Congress. H.R. 1873 and S.
2724 are revised versions of S. 843, introduced in the 108th Congress. All of these
bills involve some form of emission caps, typically beginning in 2010; most include
a tradeable credit program to implement that cap. The provisions concerning SO2,
NOx, and Hg in S. 150, S. 730, S. 2724, H.R. 1451, and H.R. 1873 are generally
more stringent and take full effect earlier than the comparable provisions of S. 131.
S. 150, S. 730, S. 2724, H.R. 1451, and H.R. 1873 would cap utility emissions of
CO2. It is difficult to compare those CO2 caps with the Administration’s proposal
concerning CO2 — both because the Administration’s proposal is voluntary rather
than mandatory and because it is broader (covering all greenhouse gas emissions
rather than just utility CO2 emissions). However, it appears that actual U.S.
greenhouse gas emissions would be higher under the Administration’s proposal than
those allowed by S. 150, S. 730, and H.R. 1451. This report will be updated as
warranted.